Tag: Ron Shaich

I have written a couple of times about the dangers of using Powerpoint too much but Ron Shaich, CEO of Panera Bread, beat me to warning people about the dangers of Excel. I have no problems with the quality of Powerpoint as software but it often prevents people from actually thinking and having a conversation, to making meetings one-directional.

Shaich’s post, Stop Managing from the Spreadsheet, shows how too many executives use Excel to replace thinking. Given that many of you have recently finished, hopefully, your 2016 planning cycle, you are probably well aware of the central role spreadsheets take in the strategy process. Many of you have probably spent hours (or days or weeks and maybe even months) studying spreadsheets to see trends in your business. Shaich points out, however, these spreadsheets will not prognosticate the future but just help guide you in the right direction.

Just as every investor has been warned hundreds of times, “past performance does not guarantee future returns,” the same holds even more true for your business. Look at Farmville. For many years, it was growing 20 percent or more year over year. By seeing these trends on your spreadsheet, you would take that information and then think of a way you can add five percent to the growth. What the spreadsheet is not telling you is that the majority of your user base is about to shift from Facebook to mobile devices to consume entertainment and that Supercell is launching a game called Hay Day on those devices. If you just looked at the spreadsheet and your Farmville numbers, you missed a seismic shift in your business. Not until you see the next spreadsheet with a 25 percent drop in revenue do you take action, thus fighting a defensive battle rather than taking steps to pre-empt the competition.

Shaich makes a good point that people rely on Excel because they feel it reduces risk. As he writes, “The future is filled with uncertainty and no one likes uncertainty. Uncertainty implies risk, and we all seek ways to minimize risk. The hard numbers of the spreadsheet make the future seem more certain. However, a spreadsheet is only one possibility of the answer, not the answer itself. A spreadsheet is merely a way to organize data. Its numbers generally capture trends of the past, but it is in no way predictive of what’s to come.”

Solutions to the Excel problem

One solution to this problem, which Shaich recommends, is building ranges for the future into your spreadsheets. Use the spreadsheet to not only predict the outcome, but show what could happen in a positive and a negative case (I hate the phrase best and worst case, because I have seen things get a lot better or worse than people ever would have imagined). You can then plan for different possibilities.

Although Shaich does not touch on it, another risk with Excel that you must avoid is changing the numbers to prove your strategy. Too often, when the future does not look positive, rather than struggling to come up with a strategy that addresses the reality, numbers in the spreadsheet are “adjusted” so that the future is more positive. Most of you will realize that changing the spreadsheet does not change the results of a strategy and that the problems you need to address actually may become more severe the longer they are neglected (or “adjusted”). As I wrote in Changing the Numbers does not Change the Reality, “you will only see the benefits of being a data driven company if you look at the numbers objectively and let those collecting the numbers use their best efforts to create accurate analysis.”

Key Takeaways

Spreadsheets too often replace thinking when developing a strategy.

Spreadsheets do not predict the future but are just a guidepost with various potential outcomes.

To avoid the Excel problem, create ranges of projections, incorporate qualitative data and look at the numbers objectively.

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Lloyd Melnick

This is Lloyd Melnick’s personal blog. I am EVP Casino at VGW, where I lead the Chumba Casino team. I am a serial builder of businesses (senior leadership on three exits worth over $700 million), successful in big (Disney, Stars Group, Zynga) and small companies (Merscom, Spooky Cool Labs) with over 20 years experience in the gaming and casino space.